How to establish a fair price for standing hay

Buyers should pay by the ton, not the acre, and there should be 10 to 30 per cent allowance for weather risk

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Determining a fair price for standing hay isn’t an exact science, says a provincial farm business management specialist.

“Hay prices are difficult to establish as they are affected by a combination of factors such as spring inventory carry-over, pasture conditions, feed competitors, cutting date, quality, yield, and location,” said Dean Dyck. “As we saw in 2015, hay supplies were low coming into the year and pasture conditions were poor. This caused hay to be in demand and prices rose substantially.

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“Only after silage and greenfeed crops were harvested did we see a softening in the price. This year, a mild winter allowed hay supplies to rebuild somewhat but pasture conditions were poor in the spring.”

Current hay prices are less readily available than those for wheat, canola or barley, and there is often large regional variation in price. Typically, hay prices do not settle until about the end of October when hay, greenfeed, silage and salvaged cereal crops are harvested.

Current asking prices are available on the Alberta Hay and Pasture Directory at Agriculture Financial Services Corporation also publishes historical price data (link found at the bottom of the home page).

“Basic economic principles should factor into the pricing decision,” said Dyck. “If you’re the seller, the price should be based on the estimated market value of hay in the bale less the expected harvest costs (the cost to cut, bale and haul hay) and an allowance for weather risk. This weather risk would be at least 10 per cent for grass hay and as high as 30 per cent for alfalfa, reflecting the loss in nutritional value due to poor weather.”

Buyers should compare the price of the bale of hay versus the cost savings of purchasing the crop standing in the field.

“Buying a standing crop can provide more quality control, the forage you want, and be from a location that minimizes the cost of transport.”

Dyck recommends negotiating by the ton rather than by the acre because yields can be quite variable, even within fields or a local area.

“Since estimation of yield is critical in finalizing the value, historical records are a starting point if they are available. Once the value is agreed upon, it’s a good idea that the buyer pay one-half of the value at haying time and make the final payment in the fall when the yield is known and prices are more firmly established. Remember, the price is determined by the market, and not necessarily what we think it should be.”

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